Price trends of oil, polymer feedstock and commodity polymers in Asia for the week of October 6, 2008

CRUDE OIL A $10 dip was witnessed in crude oil values in the week of October 6, 2008. Falling for the fourth consecutive day, oil prices ended the week at US$91 a barrel, on concerns that efforts to restrain the spreading financial crisis will not be successful in avoiding a further decline in oil demand. The 12% drop observed this week is the biggest drop since 2004, and accompanies higher borrowing costs, deteriorating fuel demand in USA that has averaged 19 mln bpd during the past 4 weeks, the lowest since October 2001. Friday marked the passing of the US$700 billion bailout bill in USA, accompanied by a growing perception that the bailout package will hinder US growth. Europe witnessed a scuttle to salvage three banks, accentuating the effect of the credit crisis. Oil demand has weakened in USA-the world's top consumer, Japan and Europe. Fears abound that demand will start shrinking in China, whose rapid growth helped trigger oil's rise from just $20 a barrel in 2002. NAPHTHA Naphtha prices have fallen in line with deteriorating oil values in the week of October 6, 2008. Prices in the continent dipped to hover around US$750/MT CNF Japan. ETHYLENE In the week of October 6, 2008, FOB Korea ethylene prices dipped below US$1000/MT in Asia even as the Chinese return to the markets after a week long break. Falling crude and naphtha values and deteriorating downstream demand continues to exert pressures on ethylene prices, keeping market outlook persistently gloomy. Naphtha prices in the continent dipped to hover around US$750/MT CNF Japan, further diluting buying sentiments for ethylene. Buyers prefer to wait and watch for a further ethylene price correction in line with falling input costs. Sellers continue to offer material at around 1000 dollars, but are being met with reluctance from buyers, leading to a downward evaluation of offers by a further fifty dollars. Most end-users in Far East, saddled with large stockpiles, are not in a rush to buy. PROPYLENE Propylene prices have dipped to US$1100/MT in Asia in the week of October 6, 2008. Lack of ample transactions influenced by weak downstream polypropylene demand and falling feedstock costs, marked the propylene markets of Asia. A quietude prevailed as buyers anticipate another price drop, as naphtha prices in the continent dipped to hover around US$750/MT CNF Japan. Sellers continue to offer material at US$1100/MT FOB Korea, while buyers have expressed intent to buy about hundred dollars lower. STYRENE MONOMER Styrene Monomer prices have dipped to US$1290/MT in Asia in the week of October 6, 2008. Though seller's offers for late October delivery have dipped to US$1280/MT levels, buying intention continues to be pegged lower. As buyers and sellers are both unwilling to relent, very few deals have been concluded as yet. Feedstock benzene prices have plunged below US$950/MT, hovering at 8-month lows. In response to deteriorating SM demand and meager profit margin realization, upstream benzene producers are also reducing operating rates. Japan Energy Corp. plans to reduce runs at benzene plants in Chita and Kashima by 10-20%, South Korea's Yeochon Naphtha Cracking Centre (YNCC) plans to reduce by 10%, run rates at three of its BTX plants in Yeosu. On the other hand, LG Chemical has brought back its 170,000 tpa SM plant online after a gap of 6-7 weeks. The company had delayed start up at an earlier date because of poor returns. VCM VCM prices have dipped below US$790/MT CFR China in the week of October 6, 2008, on weak downstream demand, even though the Chinese have come back after a week long holiday. Downstream PVC prices have sunk and downstream markets remain lackluster. Suppliers do not seem to be in a rush to liquidate stocks as they do not have excessive stockpiles. Hence the market is expected to gather direction based on who will relent first. EDC EDC prices have fallen to US$380/MT in the week of October 6, 2008 on restrained demand from downstream VCM/PVC markets. Despite lowered offers, sellers continue to face dampened buying on subdued VCM and PVC markets. POLYMERS HDPE HDPE prices dipped to US$1400/MT in Asia in the week of October 6, 2008, in line with sinking ethylene values. Buyers continue to abstain from buying, keeping the market outlook pessimistic. Buyers continue to resist the drop in sellers offers of US$1450/MT CFR China, as they are scouting for prices at least 70-80 dollars lower. This resistance due to unenthusiastic buying has got down deal values to hover around US$1400/MT. LDPE LDPE prices that had dipped to US$1675/MT levels last week, continue to fall in Asia in the week of October 6, 2008, on lackluster demand. Last week, few quotes fro October dipped to US$1650/MT. As dampened buying sentiments persist, prices buyers could be keen to buy at lower levels. LLDPE LLDPE prices dip below US$1500/MT in Asia in the week of October 6, 2008. A persistent drop of almost fifty dollars was witnessed in LLDPE prices as demand continues to be very meager. POLYPROPYLENE Polypropylene markets, where prices plunged by almost hundred dollars at the onset of the week long Chinese national holidays, continue to remain lackluster on slack demand. October offers from South Korea, India and Saudi Arabia have dropped to US$1300/MT CFR China for yarn/injection grades and at around US$1350/mt CFR China for IPP grade, despite which demand continues to remain restrained. In fact, as end user demand continues to be dampened, few buying interest from China has been already as low as US$1200-1250/MT CFR CMP levels. POLY VINYL CHLORIDE PVC prices have plunged by US$100 in Asia in the week of October 6, 2008. A pessimistic outlook prevailed in PVC market of Asia due to a dearth on concluded deals last week as the major buyers in the continent- the Chinese, were on a week long break. Though sellers have lowered offers to US$970/MT CFR China, buyers have expressed an interest to buy almost seventy dollars lower. The Chinese do not seem to be in a hurry to buy and prefer to wait and watch- this could result in further price declines. Saddled with stock piles due to lackluster buying, several PVC producers in Asia have got down operating rates. Hanwha Chemicals is believed to be running its 560,000 tpa PVC plant at 70% capacity, while Japan's Taiyo has cut operating rates by 15%. GPPS GPPS prices have dipped below US$1500/MT in Asia in the week of October 6, 2008. Operating rates at some plants in Taiwan have been slashed by as much as 40%, as offers are being maintained at US$ 1550/MT CFR China and above. ABS ABS prices have tumbled below US$2000/MT in Asia in the week of October 6, 2008. As crude and feedstock butadiene values come tumbling down, demand has been lackluster as buyers prefer to wait and watch for a price correction. Buyers have expressed an interest to buy about fifty dollars lower, as several producers in the region cut operating rates by as much as 50% as stocks pile up.